Is 2022 a Good or Bad Time To Invest in Short-Term Rentals?

Depending on who you ask, you’ll hear very different answers to the following question: Is?right?now?a smart time to invest in short-term rentals (STRs)?

We want to address this question and all of the recent recession speculation in the only way we know how to—with data.

Know there’s valid glass-half-full and glass-half-empty perspectives on the state of the American economy and STR industry at large. Here’s a snapshot of the evidence:

Glass-half-full news

• 528,000 new U.S. jobs were added in July 2022.
• The unemployment rate is 3.5%.
• Consumer spending remains robust, especially on services.
• Declining gas prices should ease inflation.
• The stock market has seen gains in recent months.

Glass-half-empty news

• Weak gross domestic product (GDP), as a result of excess inventories, is slowing business investment.
• Consumer confidence measurements are at record lows.
• Inflation remains stubbornly high.
• Real Personal Income (RPI) is falling.
• The housing market is slowing.

What does this mean for STR investments? Well, U.S. demand for vacation rentals is as strong as ever. Specifically, this June, demand was 16.3% greater than it was in June 2021 and 23.8% greater than June 2019. But the catch is that supply is also through the roof—1.37 million active listings in June 2022 (+25.4% year over year and +9.8% versus 2019).

The important takeaway is that, as a result of this supply boom, occupancy has dropped 9.2% YOY to 63.6% (+8.6% versus 2019). And our data indicates that occupancy will continue to decline in 2023 but not as dramatically as it has in 2022 versus 2021.

We anticipate occupancy rates for 2022 will ultimately settle at 57%, but that’s still nearly four points higher than before the COVID-19 pandemic.

Occupancy is a nuanced metric, sure, but it does remain one of the most effective measurements of STR success over a given calendar year. Any host or investor knows that fully booked properties generate more revenue, while empty properties generate less and can diminish annual profit margins.

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